Experts analysis on budget 2023 on Taxation and expected outcome in the year ahead

Sushil Kumar, Advocate cum Income Tax Expert

New Delhi (India), February 6: Union Budget Analysis on Taxations 2023-2024. The International Monetary Fund (IMF) published a report whereby, it was stated that Indian Economy will reach 5 trillion-dollar economy by 2028-29. However, IMF quickly retreated from its statement and corrected its calculation by stating that the Indian Economy will reach its target of the 5 trillion-dollar economy by 2026-27.

In order to assess the practicality in this target, it is essential to determine the target which has been met so far. Presently, we have already achieved 3.5 trillion dollars. During the period of pandemic and the Ukraine war, Internationally India proved itself to be a dependable nation.

Finance Minister (FM) Nirmala Sitharaman marked 5th Union Budget presentation since 2019. The two pivotal questions surrounding the Union Budget 2023 presented by the FM are: Are there any substantial changes proposed to be brought to the tax regime and whether these changes will have any substantial effect on the common man of this nation?

Before addressing the above two questions, we will briefly address the Union Budget at a wholistic level. The Union Budget has come up with several new initiatives which are proposed with an intent to push the growth in Indian economy.

Sushil Kumar, Advocate cum Income Tax Expert said “Caring for the well-being of citizens is integral to nation building, India stands for putting people first, and this Union Budget, a first in Amrit Kaal, resonates with this ethos.

Few of these initiatives are: 50 new airports, focus on Saptarishi for India’s growth during Amrit Kal, completion of Phase III of the e-courts project, Global hub of millets (Shree Anna), change in GST rates, introduction of new ITR form, change and replacement of 6 tax slab rates to 5 new tax slab rates, appointment of 100 joint commissioners etc are amongst few of them.

The changes brought into the indirect tax laws are:

  1. Custom duty reduced from 21% to 13%
  2. GST exemption on blended CNG
  3. Cost of mobiles, camera lens, TV and blended CNG would be cheaper
  4. Duty reduced on the cost of shrimps
  5. Customs on kitchen chimneys has been reduced
  6. Cost of cigarettes increased

Wholistically speaking, there have not been any major changes in the GST laws through the Union Budget 2023.

On the other hand, Direct Tax laws are expected to be drastically amended through the Finance Bill proposed through the Union Budget 2023. These amendments are beneficial for Individuals and as well for MSMEs & Professionals.

It is noteworthy to mention that 72 lakhs ITRs were filed in a single day and a total of 5 crores ITRs were filed. Further, out of the total ITRs filed, 45% of the ITRs were processed within 24 hours of filing.

In view of the same, the Government has taken several welcoming steps in the direct tax laws which are mentioned as follows:

  • Proposed to appoint of 100 new Joint Commissioners for the purpose of effective and expedite resolution of small tax disputes arising between the Revenue Department and the assesses.
  • Introduction of a new ITR Form for ease of filing returns.
  • Proposed an extension of the date of incorporation for income tax benefits to start-ups from March 31, 2023, to March 31, 2024. Further, it would provide the benefit of carry-forward of losses on change of shareholding of start-ups from seven years of incorporation to 10 years.
  • Replacement of 6 old slab rates with 5 new slab rates and basic exemption limit has been increased from Rs. 2.5 Lakhs to Rs.3 lakh under the new income tax regime in the Budget 2023. According to the announcement, 5 income tax slabs will be there in FY 2023-24, from 6 income tax slabs currently. A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income upto Rs.7 lakh will not pay any taxes.

As mentioned above, a ‘rebate’ is under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. It is important to note that rebate under Section 87A should not be misconstrued with the term exemption. This implies that if an individual is earning an income up to Rs. 7 lakhs only then he/she will be eligible for the said rebate.

On the other hand, if an individual is earning even a single rupee above the rebate limit of Rs. 7 lakhs, then the tax will be computed on the entire income. The said amendment has been reproduced hereunder:

“43. In  section  87A  of  the  Income-tax  Act,  the  following proviso shall be inserted with effect from the 1st day of April, 2024, namely:––

Provided that where the income-tax payable on the total income of the assessee is computed under sub-section (1A) of section 115BAC, this section shall have the effect as if,––

(a) for the words “five hundred thousand rupees”, the words “seven hundred thousand rupees”;”

The main objective of the Union Budget is to motivate the taxpayers to shift from the old regime to the newly proposed tax regime whereby new tax slab rates have been proposed in order to boost the India economy. The newly proposed tax slab has been tabulated hereunder: